Foreclosure can impact your credit!

You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.

Why foreclosure can be so devastating?

Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.

The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. Additionally, reports that your credit can be impacted even more if your credit score is excellent. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.

Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
                                 

Improving your credit after a foreclosure

It can take several years to improve your credit after a foreclosure. You might not even be eligible to buy a home for two or three years after the foreclosure is complete. However, you can start working to improve your score.

One of the ways to get started is to have someone with better credit add you as an authorized user to a credit card account. However, for this strategy to be effective, you need to have a close relationship to the other consumer, as a spouse or a child.

You can also start improving your score by getting a secured credit card. You might not be able to qualify for a “regular” credit card right after a foreclosure, so a secured card can help you begin re-establishing your credit. As you make on-time payments, and they are reported to the credit bureaus, you can begin to see improvement. After nine months to a year, you should be able to “upgrade” to an unsecured card that will further help your score.

Other types of small loans, such as a personal loan from your bank or an auto loan, can also help you improve your credit. You need to be prepared to pay higher interest rates, though. As long as your credit is poor, you won’t qualify for the lowest rates. When your score starts to improve, you can take advantage of better offers and lower your interest rates.

Source: Secondary

They affect your credit score most.

You probably already know about the connection between your credit history and your credit report and how both impact your credit score. Remember that your credit score is like the grade on your credit report: companies use this number to rate your likelihood that you’ll repay your debts and pay your bills.

But just what are the factors that go into calculating your credit score? And which ones impact your score the most?

Here’s the breakdown of what affects your credit score, from the highest impact to the least:

Your payment history : Whether you pay your bills on time and if you always pay at least the minimum amount. Even one late payment can impact your credit history.

                      

The amounts you owe : Some percent of your credit score is determined by the amounts you owe, which is made up of two parts: the total amount of money you owe all your lenders and the percentage of available credit that you’re using (like hitting the limit on your credit card). People who are using less of their available credit are considered lower risk than people who are using a lot.

The length of your credit history : The amount of time you’ve been using credit makes up fifteen percent of your credit score. Someone who has been using credit for a long time is considered less of a risk.

New credit you open or try to open : Some percent of your credit score is also based on the amount of new credit you’ve applied for recently. Every time you apply for a loan, credit cards, store cards and even a cell phone, someone will run your credit. Someone who applies for a lot of credit in a short amount of time is seen as a credit risk.

Types of credit : The types of credit you have impact about ten percent of your credit score. People with a mix of credit types, like credit cards, an auto loan, and a mortgage may have a slightly higher score than those with only one type.

So, now you know what makes up your credit score, which is your overall “credit grade.” Your credit report, on the other hand, gives you all the details about each account and shows you everything from how much money you owe, how many accounts you have, how many accounts are in good or bad standing, and how many times a lender or another company has checked on your credit history. Since, your payment history make up 35 percent of your credit score, you’ll want to pay attention to two places on your credit report: potentially negative items (accounts unpaid or past due) and your status and payment history.

Even if you do have a few negative marks on your credit report, the good news is that on-time and regular payments can help boost your credit score. It may take a little time and patience, but paying your bills consistently can help boost your credit.

Source: Secondary

When did you last check your credit report?

One of the most important aspects of your finances is your credit. Your credit score is an interpretation of the information in your credit report. Keeping on top of your credit report is vital if you want a good credit score.

With so much riding on your credit, it makes sense to check your credit report monthly so that you can keep tabs on your situation.

                                    

Are You an Identity Fraud Victim?

You probably understand the importance of checking your credit report to see where you stand before you apply for credit. After all, you don’t want an unpleasant surprise when you apply for a mortgage! However, even if you don’t plan to apply for a loan in the near future, it still makes sense to check your credit report.

By keeping tabs on your report, you can quickly identify cases of identity fraud. Your credit report can provide you with a big identity theft red flag: “Has a new creditor appeared on your report for an account you know you didn’t open?”

When you see a new loan, in your name, might be an indication that your identity has been stolen. With so much publicity surrounding data security breaches at major retailers , it’s especially important for you to check your credit report to see where you stand.

You can spread out your reports so that you get one from each bureau every four months. 

The faster you catch this identity fraud, the faster you can fix the problem and restore your good financial reputation.

What About Mistakes?

Sometimes, it’s not a matter of fraud when information is wrong on your report.Checking your credit report is important not just to identify possible identity theft, but also to make sure that the information in your credit report is accurate. Companies use your credit report to determine credit worthiness for a loan and whether you will be eligible for purchasing insurance in some states.

And that’s not all, some employers also review credit reports when making hiring decisions. Negative mistakes on your credit report can cause you to appear less responsible than you are, and could cost you the job.

So, credit report mistakes can result in higher interest rates on loans, and in higher insurance premiums, as well as affect your ability to get a better-paying job in some cases. Over a lifetime, mistakes on your credit report can cost you thousands of dollars — and they might even cost you a job.

Are You on the Hook for Someone Else’s Debt?

Another good reason to check your credit report regularly, is when you are on the hook for someone else’s debt. If you have joint or cosigned debts, you should check your report frequently.

Many married couples apply for debt jointly. This means that your credit accounts are in both your names. It’s important to check your credit report if your spouse is in charge of making payments, just to be sure that it’s actually happening, since your credit rating is impacted by the status of your joint your loan.

It becomes especially important to keep up with payment history if you are divorced. Your shared debts are usually divided. This means your ex might be in charge of making payments on your joint credit account. If he or she doesn’t meet the obligation, it reflects on you. Regardless of your divorce decree, you are on that bill.  Creditors don’t care about your divorce.

Whenever possible, try to get your name off the debt when the divorce goes through. If this isn’t an option, check your credit report regularly to keep tabs on the situation.

This is also a requirement if you have cosigned on someone else’s loan. When you cosign, you accept responsibility — even though the other person is making payments. Check your credit report to see whether or not that debt is being paid on time. If it’s not, you will need to take steps to prevent it from destroying your credit. This isn’t just about divorce. This applies to accounts with children, parents, friends, or anyone you’ve entered a loan with, or cosigned for.

Your credit report can provide you with advance warning that something isn’t right with your financial image. 
Check it regularly, fixing mistakes, identifying fraud, and intervening when it looks like your joint or cosigned debt isn’t being paid as agreed.

To learn more about identity theft, visit www.cibilconsultants.com
Source: Secondary

Bankruptcy: Merits and demerits!

The feeling that your finances are out of control, and that you’ll never be able to afford anything again, is a terrible one. But if you’re overwhelmed by debt and you can’t see how you could possibly get out from under it, bankruptcy is an option you may want to consider.

Bankruptcy is a legal process through which existing debts, under the protection and supervision of a court, are eliminated or reduced, and/or the repayment period is extended.

                    

PROS

– You get a “fresh start.” Most unsecured debts – such as credit card debt – will be discharged through bankruptcy. That means you no longer have to pay that debt. Secured debts are those that have collateral, such as your mortgage (for which your home is the collateral) or your car loan (for which your car is the collateral). If you continue making the payments, you will most likely be able to retain your home and car throughout the bankruptcy proceedings and beyond. However, if you cannot afford the payments or stop making them, the creditor is likely to try to repossess the property or at least re-negotiate the loan.

– Filing for bankruptcy creates an automatic stay against collection efforts. This means that any creditor who tries to collect on the debt after the stay has gone into effect may be cited for contempt of court or ordered to pay damages. If you are about to be evicted, foreclosed on, or have your utilities shut off, the automatic stay resulting from filing for bankruptcy can give you a little breathing room. However, note that creditors can ask a court to lift the stay, and it will likely be granted if it appears you cannot or will not pay off even a part of your debt. Additionally, the automatic stay does not apply to certain types of debt, so depending on the type of debts you have, it may not be helpful.

– You probably won’t lose as much as you think. Every state protects certain types of assets during bankruptcy proceedings, such as your home, personal transportation vehicles, money invested in qualified retirement plans, household items, and clothing. 

CONS

– Bankruptcy is a public legal proceeding, so your family and friends may find out that you have declared bankruptcy. If you have been hiding your financial difficulties, then you may be embarrassed to have others know about your situation. However, unless your case is publicized by the media or you personally know your creditors, it is unlikely that your friends and family will find out about the bankruptcy proceeding the same way they would find out about a new job or new baby.

– Certain types of debt cannot be discharged through bankruptcy, including student loans, child support, alimony, and debts arising from criminal conduct. Thus, if these types of debts comprise all or the majority of your debts, bankruptcy will not relieve your financial burden.

– The bankruptcy will remain on your credit report for ten years, and is the worst kind of negative entry you can have. Thus, you may find it extremely difficult or impossible to borrow money, or the rates you are offered may be much higher than what the average borrower could get. However, it is certainly possible to rebuild your credit history and eventually have a good credit rating.
Visit- www.cibilconsultants.com
Source-secondary

How to maintain a good credit score?

You might be known that loan applications often get rejected due to less credit score. Have you ever thought what leads to constituting your credit score? Keep in mind, only repaying your loans in time doesn’t edge a good credit score as there are other factors also which impact our credit history. A good credit history can be maintained by following these simple rules:

Pay your dues on time:

Paying your EMIs regularly helps in upgrading your credit score whereas a delay in payment negatively affects your credit score as well as your credit history. Making late payments are viewed negatively by the lenders and affect drastically the chances of getting your loan approved.

Use your credit limit wisely:

Don’t fully utilize your credit limit on your credit card. You must be careful not only about making payments in time, but also about using your credit limit. If you over utilize your limit, the negative it is for your credit score. It is always prudent to use up to half the limit of the sanctioned amount on your credit card. Avoid relying on borrowings and secure yourself financially while using lesser credit limit.

Uphold a healthy mix of credit:

Usually, a borrower credit history should sustain a mix of secured loans and unsecured loans. Secured loans comprises of Home loan, Car loan etc. whereas unsecured loans comprises of Personal loan, Credit card etc. If the borrower is defined to high mix of unsecured loans, then the risk of default increases. The indefinite credit history should contain a mix of a home loan, car loan and a couple of credit cards.

Regularly inspect all your accounts:

You should examine your co-signed, joint and guaranteed accounts monthly and ensure that all your loan repayments made in time. As a guarantor or co-applicant, you are held equally liable for missed payments. Remember, your joint holder’s negligence could affect your ability to access credit when you need it.

Avoid applying frequently for loans or credit cards:

Many inquiries for loans or credit cards may affect your credit score. The lender will take it negatively as the borrower behaviour shows ‘credit hungry’ and indicates that the debt burden is likely to or has increased and you may be less capable of keeping any additional debt. If you have made many applications for loans or credit card, it could reflect in your credit report which will lead a loan provider to view your application with caution.

Monitor your credit report timely:

Paying your dues in time does not initiate a good credit score. As some errors like inaccurate late payment may pull your score down. So, reviewing your credit information report frequently may ensure that your credit history reflects your current financial status accurately without any errors.

Source- Secondary

Are you using many credit cards?

A credit card is a loan with a difference. Here, you get credit while you go spending or paying bills. However, the interest rates on credit cards are much higher than that on other loans. The more credit cards you have, the more you may be tempted to spend and the more difficult it will become to keep a tab of how much you have spent and when the repayments are due. Do remember that credit cards are the most expensive types of loans available in the market, and whether you miss your payment deadlines due to an oversight or because you have inadequate funds, you will have to pay heavily.

Credit card cautions

If you plan wisely to use each card to its advantage, but also keep a check on the rising charges so that the debt remained under control. Maintain your credit score over a period of time so that you could remain in the good books of the credit card companies. This is exactly what multiple credit cards holders should do to disentangle yourself from debt. However, if you cannot religiously keep a track on your spending or monitor each card prudently, then multiple credit cards can become a hindrance rather than an aid to money management, so step with caution depending on the kind of spending habits you possess!

Impact on credit report

While credit cards are extremely handy pieces of plastic, ideally, banks in India haven’t set any obligations on the number of cards you can carry. In India, you can easily find customers using four credit cards and the ones that don’t even have a single card. Due to the fact, your CIBIL credit score could be strained due to irrational credit card usage. In actuality, you must keep the number of credit cards which you can afford. Avoid using more than one card if you don’t have a good monthly income source.

Monitor your credit limit religiously

Your lenders will see you as a high risk candidate if you have high amount of outstanding balance to be paid. In fact, credit cards are the easiest way to fall into a debt trap that is a situation in which you borrow just to maintain your existing borrowings. So, to be on the safer side, you need to keep your outstanding balance about 10% to 30% of the overall credit limit. By doing this, you’ll get some relief and will also able to borrow more funds, if the need arises.

Never close your old card

Your oldest credit card age will do a significant role when the banks decide to open a new account under your name. In such cases, you can earn more points for keeping a long-established relation with the bank. The credit history of your old card is always better; and for taking loans, you could use your old credit card. If you wish, you could keep another card also for several other references and shopping online. Don’t ever close down your good old credit cards, even if you’re not using them frequently because they will definitely work towards building your good credit history.

Opt for right Credit Card

The credit card market in India is overwhelmed with attractive offers and deals that are quite tempting for the customers. As per the needs, every sensible card user can acquire several credit cards frequently. If you’re a constant traveller, then you could go for a travel credit card. Petro cards and special cards for getting discounts on restaurant bills are also highly popular in India. Whoever looking forward to multiple card options can decide buying these credit cards for a suitable experience.

Ideally, cards should be used as a temporary substitute for carrying cash. And, if that is the only motive you have when you carry a credit card, you will find that having one or at most two is quite sufficient.

Source- Secondary

Increase your credit limit by exhibiting

Your credit limit may be raised if you exhibit timely and do full repayments. However, having a high credit limit and multiple lines of credit may hurt a person’s overall credit rating. In these cases, new potential lenders can see that the applicant has access to a large amount of debt, which may lower the chances that this person will be able to repay his or her debts in the future. As a result, new potential lenders might be less likely to offer an additional source of debt.

Information required by lenders

Relying upon the credit increase amount that is requested and the length of time the borrower has held the line of credit, a lender may ask for information directly from the borrower, pull a credit report or use information it already receives from the credit bureaus each month. Such information as employment status, income and housing expenses will be requested of the borrower. The lender may also look at the borrower’s payment history, including whether payments are made on time, how much credit is regularly used and how often the balance is being paid.

What influence your request?

Your request could be affected negatively for a credit increase if you are subjected for making late payments from the previous six months; whereas monthly payments that are a higher percentage of the balance have a favourable effect. The financial institution considers the client total amount of debt; the number of other lines of credit; the number of other requests for credit that have recently been reported to the credit bureau.

Conclusion

In case, your request gets refused then a credit increase may negatively affect your credit score, because the request is reflected in your credit history for a short time. If a request is denied because the current amount of credit is too high, then an increase can be requested again once some of the balance has been paid.

Source: Secondary

Credit score being affected by debt payoff plan?

When asked by lenders, “Do you have any current liabilities?”  , many borrowers are tempted to say ‘No’ or make unsubstantiated claims. Having debts could lessen your chances to possess credit at times however; it’s always wise to settle your debts timely. But many borrowers often think, “Will a debt settlement program affect my credit score?”  Let’s find out…

Impact on credit score

Settling your debt could have negative impact on your credit score. The impact depends on a number of determinants: your past and existing liabilities, the repayment history, whether or not your settled debts are presently in good standing, how much less than the original balance the debt was settled for, and many other factors.

Accounts settlement

Often settling many accounts at a time could hurt more than settling just one. While there isn’t always a hard and fast rule, generally your credit score drops less as you become more delinquent in your payments.

Negotiation with your creditor

It’s better to request your creditor ahead of time to have the account reported as paid in full, even when that is not the case. Your creditor is not compelled to do this, but it is not unheard of.

Consequences of non-settlement of your debt

In case, you do not settle debts then your score is not hurt right away. However, not settling might lead to continued late payments, default and credit collection attempts. These may end up hurting your score more in the long run. In such circumstances, debt settlement is a net positive on your score. The debt settlement remains on your credit report for seven years. If your settlement took place over seven years ago and is still showing on your report, contact the lender and the credit bureau to have the record changed and the settlement removed.

Conclusion

By nature, a debt settlement plan modifies or negates the original credit agreement. When the lender closes the account due to a modification to the original contract, other lenders are likely to take notice and be more wary about granting credit in the future.

Visit- www.cibilconsultants.com

Source:  Secondary

Find your credit score

Do you know your credit score as per Credit Information Bureau (India) Limited (CIBIL)? If not, find out immediately and if yes, use it to your advantage. When you apply for a product, a ‘credit check’ is done. It’s an attempt to predict your future behaviour based on what you’ve done in the past. In a nutshell, your credit score can determine if a loan application you make will be approved or turned down.

CIBIL implications on you

Banks, especially public sector banks, consider the credit score of an individual before sanctioning loans. Regardless of either you need a large or small loan, review your CIBIL Transunion score and Credit Information Report before filing your loan application with the lender. This could acquire you a fast and simple loan processing. In accordance with CIBIL reports, a Transunion score is a 3-digit numeric brief of your credit history which symbolizes your financial and credit strength. Your score is emerged from credit history which ranges from 300 to 900 points as specified in the Credit Information report. This score is calculated based on your history with financial institutions such as banks and credit card companies. The CIBIL CIR is given to you conjointly with your score considering that the grounds on which your credit score is developed. The lender undergoes your credit report and score to determine your repayment capacity. If you score higher, your success rate of getting your loan application approval could be better.

Low your interest outflow with good score

If you have been diligently paying your credit card dues and other loan EMIs, you will have a good credit score as per the information collected and displayed by CIBIL. However, if you have settled your outstanding credit card dues by making partial payment, it will reflect in your credit score. This can affect your chances of getting a loan, as many banks consider your credit score as per CIBIL together with other factors such as your age, income, occupation, prior relationship (if any) with the bank, etc. before sanctioning the loan.

Here’s a table to give you an idea of percentage of new loans sanctioned to people with different credit scores:

Credit score	Percentage of new loans sanctioned
<650	4.7%
650-699	5.2%
700-749	9.7%
750-599	22.8%
>=800	57.6%
source: cibil.com

Hence, if you are looking for a loan, be it a home loan, personal loan or car loan, you must know your CIBIL rating. Armed with a good score, you can get a better deal by negotiating the interest rate on the loan or get other related charges waived off. You can lower your interest rate which goes a long way in reducing your EMIs.

A good score allows you to avail a wide spectrum of credit from various lenders. It also means that you will be able to easily secure a new credit card or get a loan at more favourable terms because of the choice of lenders. On the other hand, if you don’t have a good score then you will have to make do with either no borrowing or borrowing at a very high cost.

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Rectification of errors is a necessity

Don’t let inaccuracies in your Cibil credit report turn into costly mistakes. As your Credit Information Report (CIR) plays a crucial role in the loan application process. Hence, any discrepancy in your CIR may result in reduced chances of a loan approval. Therefore, it is mandatory that the information on your CIR is accurate and updated.

Your credit information is collected by every bank where you have a relation, be it a savings account, a current account, a credit card or a loan. The bank keeps track of the length of your account, its usage, your payment track record and other data.

Your CIBIL Transunion score is a 3-digit numeric value which summarizes your credit history and financial health. The CIBIL score you receive will range between 300 and 900. The higher the score the more creditworthy you are. Sometimes an error in your Credit Information Report (CIR) can result in problems securing a loan. Some of these errors in a CIR can be rectified easily. Only errors pertaining to basic information such as name, income tax ID, date of birth; account information and ownership of account, etc. can be rectified. You will need to provide information related to your name, date of birth, address and contact information in an online form. You will also need to furnish the reasons for disputing your CIR. The control number which is a unique 9-digit number written on the top right hand side of your CIR and the date of CIR will also have to be filled in order to complete the request for change. CIBIL then evaluates the case and if need be, takes it up with the relevant credit institution. This process can take up to 30 days from the date of filling the request. A service request number will be generated as soon as you complete the online procedure and you should note it down for future correspondence.

Here are some of the common inaccuracies that you must scrutinize for in your credit report.

• Account information
  Making duly payments on your current loans and credit cards will boost your credit score. Make sure that all your loan accounts are reflected in your CIBIL credit report as good accounts, if not reflected in credit report then it may bring down your credit score.
• Personal information
  Your credit report enclose the personal information like your name, address, date of Birth etc. While it may appear insignificant, but personal information being correct means your record cannot be mistaken for someone else.
• Records are not updated
  It is probable that you have paid off an outstanding loan over three months but your credit report records still show it as outstanding. This will have an adverse effect on your credit score.

Incorrect credit limits

It is viable that your credit card issuer has increased your credit limit and not informed the credit bureau. A lower credit limit would mean that your account will show a high credit utilisation ratio. A high credit utilisation ratio impacts your credit score negatively.

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Coping with closing credit card correctly or not?

Credit cards are the easiest way to fall into a debt trap, i.e. a situation in which you borrow just to maintain your existing borrowings. There could be plenty of reasons to close your credit card: you have many cards, your card issuer increased rate of interest or maybe you don’t want to keep a credit card somehow. Any credit card cancellation must be in accordance with the banks exit policy or else it can come back to haunt the individual for pending dues. Before taking an initiative to close your credit card, find out whether closing that card affect your credit score. Undertake the following steps to close your credit card in the right way.

Pay Off the Balance

The bank will close your credit card only after it is free of any pending balance which is due to the bank. If you can, pay off the balance on the credit card before you close it. This will lessen the impact to your credit score and give you one less credit card balance to worry about. You can close a credit card even if you still have a balance, but your credit score may suffer. And, you’ll still have to make regular monthly payments (at least the minimum) until you’ve paid off the balance. Pay off your pending amount and keep a record of the payments made for future use in case of any dispute.

Communicate with the Customer Service

Once you have decided on which credit card to close first, the first step is to call the concerned customer service and intimate them about your closing card request. Call your credit card’s customer service using the phone number on the back of your credit card and follow up the request using a written communication either directly or through an email. Don’t be surprised if the representative tries to talk you into keeping your account open. For example, they may offer to lower your interest rate or enroll you in a rewards program. If you’re sure you want to close the account, don’t allow yourself to be convinced otherwise.

Check Your Credit Report

Review your credit report to make sure the credit card is reported as closed. This will allow you to keep a check on the extent of damage the credit card cancellation had on your overall credit score. Since credit utilization ratio decreases after cancellation of each credit card, it won’t necessarily hurt your credit score if it’s not reported as closed, but you want your credit report to be accurate about the status of your accounts.

Follow-up with a Letter

Once you pay off all pending dues for the concerned credit card, insist on getting a written acknowledgement to have a record of your credit card closed. After receiving a written confirmation letter only then you should destroy your card. Keep a copy of the letter for your records.
Visit: www.cibilconsultants.com
Source: Secondary

Missed the credit card deadline? Now what next?

Every month, a large number of people miss the deadline for making credit card payments. Late payments are one piece of information that credit reporting agencies use when calculating your score.  However, late payments of credit cards not only attract penalties but also bring other disadvantages like high rate of interest and affect your credit score. The best thing you can do is make your payments on time each month – that way you won’t be reported as delinquent. Here, the consequences of missing the credit card payment deadline are enlisted below:
                  

Credit score may decline

Late payments can have a significant effect on your score affecting your ability to get new credit in the future. How much your credit score declines after a late payment depends on the other information in your credit score – generally, the better your credit, the more points you stand to lose.

Higher interest rates

Creditors don’t just penalize you with a late fee, they’ll often increase your interest rate to the penalty rate, the highest interest rate on your credit card. The higher interest rate increases your finance charges making it more expensive to carry a balance.

Late payment fees

Your next billing statement will include a fee for the missed payments.Late fees range typically depends on whether it’s your first time being late in the past six months. You’ll be charged a late fee each month your payment is late.

Effect on your credit report

When your payment is more than 30 days late. Entries are added to your credit report and remain stay for seven years. If you miss the next payment, the entry is updated to 60 days, and so on until your account is charged-off after 180 days.

Conclusion

Keep a track of when payments are due every month to avoid the bad consequences. Remember to use your money in the most efficient way possible by not making payments below the minimum and understanding the difference between this amount and the total amount due. So be patient, use credit card wisely and handle credit without getting into trouble.
Visit: www.cibilconsultants.com
Source: Secondary

Is creditworthiness affected by cosigning of loan?

Being a co-signer to a loan is not at all similar to giving a personal reference….it could have much deeper implications for your financial health. Before you say yes to your close friend or relative, know about the obligations involved.

Before you co-sign

Cosigning for a loan simply means that you are vouching for the fact that the borrower will repay the loan if he or she defaults, you are going to make that repayment yourself! So think about it. No matter how close a friend or relative the borrower is, and no matter how credit worthy you think they are, there is always a chance that they may lose their job or their ability to work or run up against some life-threatening situation that takes them far away, So, only if you have the ability and the inclination to make a repayment on behalf of the borrower, go ahead and sign on the dotted line as a co-signer.

Effect on your credit score

Cosigning for a loan does not affect a credit score unless the other person defaults on the loan and the co-signer does not pay it back. When someone needs a co-signer, it is usually because the person does not have the credit score necessary to get the loan. This means either that the person has been irresponsible with credit in the recent past or that has little to no credit history. Either way, a co-signer is promising responsibility for the debt if the person defaults. If the item is a very high-value item, such as a new car or a house, the co-signer can fall into debt very quickly.

If the original borrower defaults, the lender looks to the co-signer to take over the debt. If the co-signer cannot afford it or does not continue paying the debt for any reason, then the lender will send it to collections just as if the debt was incurred by the co-signer. At that time, the collection agency begins collection activities that can include obtaining a judgement and putting the debt on the co-signer’s credit report, which drastically reduces the co-signer’s credit score and ability to obtain new credit.

If there is a charge-off, collection and judgement, then a co-signer might be looking at up to three new negative accounts on his or her credit report from one defaulted account. For these reasons, it is important to be careful about co-signing on a loan for someone else unless the co-signer knows that the borrower has the ability and willingness to pay the money back.
Visit: www.cibilconsultants.com
Source: Secondary

Secured credit cards for better benefits

A secured credit card is backed by savings account used as collateral on the credit available with the card. Money is deposited and held in the account backing the card. The limit will be based on both your previous credit history and the amount deposited in the account. This type of credit card is used by people with little to no credit or a past history of bad credit. The major benefit that these cards provide is the ability to rebuild or establish a credit history which at some point may allow users to gain unsecured credit cards or other forms of credit finance.
                         

Don’t think that a secured credit card and a prepaid debit card are the same as both have different characteristics. Prepaid debit card, where the cash collateral is placed into an account and drawn down by using the card. On the contrary, when you open a secured credit card, you are granted a line of credit with a zero balance and a predetermined credit limit. You are charged interest on the balance to your account.

Financial institutions or lenders may be unwilling to accept the risk of providing an unsecured credit card to a customer, so they instead offer a line of credit that has been secured with cash collateral. Secured credit card payments and balances are reported to credit bureaus. In fact, the information reported on your secured credit card is treated the same as any other credit card.

Here are some rules; you need to follow to build your credit.

• Wisely use your card

Use your card prominently as by simply having a new credit limit does not help out your score much. Instead, buy a few things each month and make your payments. Manage your card responsibly and you may see an increased limit or even qualify for an unsecured card in the future.

• Repay your balances timely

Try to pay off your balance consistently every month to have favourable results on your credit report, and you may even be able to avoid interest charges altogether if you make the most of any grace periods.

• Avoid using your card to maximum limit

If you max out on your card, you will incur higher interest charges on higher balances, but you hurt your credit utilization rate by borrowing too high a percentage of your limit.
Visit: www.cibilconsultants.com
Source: Secondary

Credit history versus credit score

Consumer’s past credit actions comprises credit history. Potential creditors, such as mortgage lenders and credit card companies, use the information in a consumer’s credit history to decide whether to extend credit to that consumer. Detailed on a credit report, it is a consumer’s record of incurring and repaying debts. A credit score is a numerical expression of a consumer’s creditworthiness, which is derived from elements in a consumer’s credit history. Many creditors, lenders, and other businesses use your credit score to make a quick decision about approving your application or giving you a competitive interest rate. Your credit score is calculated based on the information in your credit report. The more negative information in your credit report, the lower your credit score will be. The worst credit report entries include charge-offs, debt collections, bankruptcy, foreclosure, tax liens, and judgements.

In most cases, information that is over seven years old is removed from your credit report. If you made a late payment, had a bill go to a collection agency or declared bankruptcy, those negative marks are removed from your credit report after seven years.

To create a detailed credit history of a consumer, CIBIL collects information from creditors on amount of money borrowed, type of loan, date account opened, late or timely payments and recent credit inquiries. In addition to creditors, courts, collection agencies, landlords and utility companies may also send information to the credit reporting agencies, and as a result, consumers may have information about bankruptcies, liens, judgements or collections accounts on their credit reports.

To determine the creditworthiness of an individual, a lender may read his or her credit history or credit reports. However, a credit score gives lenders a snapshot to easily and quickly assess a borrower’s credit history and thus his or her future creditworthiness, without having to read every element of the credit report.

The score ranges between 300 to 900, the higher your score, the better your chances of securing the loan. A good CIBIL score allows you to avail a wide spectrum of credit from various lenders. It also means that you will be easily secure a new credit card or get a loan at more favorable terms because of the choice of the lenders. If you do not have a good CIBIL score on the other hand, you will have to make do with either no borrowing or borrowing at a very high cost.

Source: Secondary

Credit card hacks!

Why do cyber thieves take the time to wreak havoc? Since hackers are going after the companies that hold your information, it’s hard to stop them from getting your information. All the same, you can take steps to minimize the damage. Here’s our guideline to deal with the uncertainty.

Ask for the new card

Call your bank and demand a new card. It’s not likely to put up a fight as the bank is responsible for paying false charges. In the event that the bank does, don’t back down on your demand.

Renew your password

If you have done any online business with the affected company – or you have an account with it – change your password right away. Make it more than 8 characters and difficult to figure out. If it’s easy for you to remember, it’s easy for a hacker to crack. While you’re at it, change and strengthen all of your passwords.

                    

Filing a complaint

Call the non-emergency number of your local police department. Say that you were a victim of identity theft and wish to file a report. This makes your status as a victim official.

Block your credit

You don’t want anybody opening up new lines of credit in your name. Blocking doesn’t allow anybody to access your credit report without your approval. Creditors probably won’t approve an application without having access to the person’s credit report.

Monitoring your account online

Don’t wait to check it when the statement arrives; check today. Keep monitoring daily for at least 30 days after your new card arrives. If you see fraudulent activity, call the bank and report it immediately. Often you can dispute charges online, but calling and talking to somebody assures that the issuer has record of your dispute.
Visit- www.cibilconsultants.com
Source: Secondary

Error in report? May fall in disputes!

The business of reporting consumer credit is highly regulated. Your Credit Information Report (CIR) plays a large part in the loan application process. Hence, any discrepancy in your CIR may result in reduced chances of a loan approval. Therefore, it is important that the information on your CIR is accurate and updated. You have the legal right to obtain a free copy of your credit report from any of the major credit bureaus once a year, which is a right you should certainly exercise. If you find information that is incorrect, you need to understand which errors you can dispute, along with how to report them.

Your credit report holds information about which companies have granted you credit, how you have managed your loan obligations and who has performed an inquiry into your profile. The only way to spot incorrect information is to review your credit history yourself.

Errors commonly arise for two reasons:

1. Creditor makes a mistake when supplying information to the credit bureaus,
2. Or the bureaus do not correctly compile your otherwise disbursed information from their databases whenever your credit report is requested.

Commonly, these errors result from mistaken addresses, mistyped social security numbers or confusion between similarly named borrowers or relatives.

Disputed fields in your report

Common areas of dispute include listed debts that are not yours, debts that are yours that are not listed on the credit report, debts that reflect an incorrect or incomplete payment history, debts that should have been removed from the credit report due to age and are still listed on your report, and inquiries from lenders that you did not authorize to pull your report.

Resolving the mistakes

The easiest way to fix a mistake is to approach the original creditor that sent the information to the bureau. The creditor is legally required to transmit a correction when it knows that it has made a reporting error, which can save you some unnecessary paperwork. A dispute request can be raised based on either a CIR purchased by you directly from CIBIL or a CIR accessed by the Credit Institution (CI) with whom you have applied for a loan to maintain your federally protected rights, but this is still a faster solution.

The CIBIL is a wonderful resource if you are considering disputing an item. It can help you figure out which items can be disputed and what kind of documentation or other proof you need, and it can supply advice on how to proceed. The investigation is normally completed within 30 days. It is possible that your dispute may not result in a corrected report right away.

 Source- Secondary